RBI issues revised circular on resolution of stressed loans. Earlier on February 12 the Central bank had mandated lenders to initiate resolution or restructuring of loans worth Rs 2,000 crore or more even if the default was recorded for a single day.

Revising its earlier 1-day default norm, RBI has now said that the lenders should now review the accounts within 30 days of default and initiate a resolution plan before the default. RBI today said that the lenders should follow a board approved policy for resolution of bad loans.

Also changing its earlier norm of 100 percent approval from creditors, RBI has now allowed approval of 75 percent of creditors for the resolution.

Further, RBI has made it mandatory that a inter-creditor agreement (ICA) should be signed by all lenders, which will provide for a majority decision making criteria.

In its new circular, RBI has said that lenders should try early identification and reporting of stress. RBI has mandated that lenders should report credit information, including classification of an account as special mention accounts (SMA) to Central Repository of Information on Large Credits (CRILC), on all borrowers having aggregate exposure of Rs 5 crore and above with them.

The accounts would be classified according to this time table:

SMA Sub-categories Basis for classification– Principal or interest payment or any other amount wholly or partly overdue between.
SMA-0 1-30 days
SMA-1 31-60 days
SMA-2 61-90 days


In the case of revolving credit facilities like cash credit, the SMA sub-categories will be as follows:

SMA Sub-categories Basis for classification– Outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of:
SMA-1 31-60 days
SMA-2 61-90 days


In addition, the lenders shall submit a weekly report of instances of default by all borrowers (with aggregate exposure of Rs 5 crore and above) by close of business on every Friday, or the preceding working day if Friday happens to be a holiday,” RBI said in its circular.

RBI said that all lenders must put in place Board-approved policies for resolution of stressed assets, including the timelines for resolution.

Related Topics: RBI’s Previous Circular   ,  RBI’s Revised Circular  ,  List of circulars repealed (Refer Annex – 3)

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